This article examines the development and functioning of industrial research in the Soviet Union. From early on, it took the path of creating institutionally separate Scientific Research Institutes (NII) within various branches of industry. Defense research was especially privileged. The growing scale of scientific research, however, did not resolve the problem of linking development with industrial production, which contributed to the technological lag that manifested itself by the mid-1950s. Reform of industrial research and development launched by Khrushchev produced a greater number of research organizations and their increased specialization, but did not resolve the main problem. An attempt to use economic stimuli for the adoption and use of new technology, introduced as part of Nikolai Kosygin’s reforms, similarly failed, largely due to the resistance within the existing system of central planning and the lack of material interests on the part of industry.